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What Will the Next Generation Farm Look Like?

Published on Wed, 03/17/2010 - 8:23am

Changes are coming to America’s cattle ranches. Operators and their employees will have new technology at their fingertips, and will require a new set of skills to employ it; the operators themselves will be changing, as will the sizes of their enterprises. And they’ll be less independent than they’ve been in the past.

Dan Loy, Iowa State Extension beef cattle specialist, says, “I think we’re seeing changes in the ownership of some of the assets…I don’t know if it’s a groundswell, but there’s more interest by young producers in having share arrangements, with partnering in different ways. An example would be working with other producers to do joint heifer development; we’re seeing a little bit of interest in that type of thing.”

Some producers are also taking another look at jointly marketing their cattle. These are the kinds of business relationships that have to be built over time; they’re not for beginners. “I read an article a while back that made an impression on me,” Loy says. “What the article basically stated is that the cattle industry in the United States was founded on free land, and expanded on cheap land, and it’s matured on inherited land. The first two are gone, and the third one is becoming less all the time.” He says the point is that the capital requirements for cattle raising, particularly for all the land a cow/calf operator needs to be viable, are increasing all the time.

Many cattle operations, of course, are not large; in Loy’s state, the average herd size is 43 head. “If you figure it takes eight hours to produce a calf, it’s more or less a part-time job,” he says. “And so, most of our cow/calf producers that have herds plus or minus that size either have a full time job off the farm, and they maintain their beef cow herds on weekends and after work; or, it’s part of a farming operation. They have a pasture and acres available, and their cow/calf herd is sized to utilize the resources within the farm.”

Either way, it’s not the main source of family income, and Loy says some people question the small cow/calf operator’s profit motivation. But he says, “I don’t think I’ve ever met a beef producer, cow/calf or otherwise, that wanted to lose money. They would like to be able to raise a family and the lifestyle is certainly part of it, but they need to be efficient enough to have a competitive business.”

If they’re not, says Scott Brown, their operations probably won’t survive them. Brown, the program director of livestock and dairy at the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri, says when cattle “hobby farmers” retire, someone else won’t pick up their operations. Although cow/calf operations have been getting bigger over time, Brown says it’s not happening at as fast a rate as in some other livestock sectors, and there are still a lot of smaller operations scattered all over the country. But he expects the move towards larger cattle operations to accelerate.

Brown says, “It seems the issue that is likely going to make us continue to get larger is available technologies that appear to be in the offering, that likely are not ‘skill-neutral’—that is, they’re much easier to employ across a lot of cows than they are for just a few cows. So I would suggest that we’re not likely going to see anything but a speed up in the move towards larger cattle operations as we look over the next decade.” As examples of these technologies he cites genetic improvements in the herd that can be achieved through synchronized timed AI programs and from early testing of calves; the genetic secrets of such prized attributes as feed efficiency and meat quality are already being uncovered.

“All of those things appear to me to be on the horizon,” says Brown, “and incorporating many of those in your operation, I think, requires larger-sized cow herds to really be economically feasible.” Existing small operations, he stresses, “certainly aren’t going away any time soon,” but he believes the technological advances will mean new operations will tend to be larger.

And that will mean more personnel on ranches. Unlike row crop farming advances like biotech crops and mechanized equipment, which have allowed individuals to farm more acres with the same manpower, bigger cattle ranches will need more workers to manage them. Both the owner/operator and the hired help, Brown says, will need access to the technology.

Genetics to predict meat quality, he believes, will also cause more ranchers to form alliances further down the marketing chain with feeders and packers. It’s been difficult for cow/calf operators to gain value from marketing alliances in the past; the prospect of a processor having a good chance of getting better beef from genetics, he says, “suggests that there’s going to be a lot more coordination that is going to occur in the years ahead, and again I’d see that as just another reason why I think we’re going to continue to concentrate at the cow/calf level in the next decade.”

Some things, though, Brown doesn’t see changing. The same states—Texas, Oklahoma, Missouri—will continue to dominate cow/calf production; urban encroachment is forcing ranchers further into the country “to a certain extent, but I’d say that’s no different than many of the other ag sectors that we have.” And he says intergenerational transfer is declining—“I think it gets harder and harder to find young folks that are interested in cattle production these days.”

Dan Loy says he is worried that the cow/calf business may shift out of the Midwest; the 2007 Census of Agriculture showed a 16% decline in Iowa pasture acres from 2002, which he blames on the growth of the biofuels industry—much of the lost ground was in higher quality crop producing areas. For that reason, he believes Iowa is not well suited to capitalize on niche markets like grass-fed cattle, although he says, “There’s no question there’s more interest from consumers in terms of knowing where their food comes from, and that’s part of the whole picture. And I think producers are interested in telling their story; it’s just a matter of getting them connected.”

On the other hand, Loy believes cattle feeding will be stable or even grow in the region due to proximity to the source of feed and the rising cost of transporting it. Where as in the Plains feedlots are mostly standalone entities, in the Midwest they “developed as a way to walk the corn crop off the farm, and the manure was just a byproduct that they had to get rid of.” Loy says that’s no longer the case; the rise in fertilizer prices has farmer-feeders “starting to look at the whole system and trying to capture some of the efficiencies, whether it’s manure nutrients, labor, capital—all of those things—within the farm.”

This helps to spread the risk between fluctuations in grain prices, and helps smaller feeders stay competitive; while historically high corn prices have now lasted for several years and reduced profits for cattle feeding, there will still be times where the return on the cattle will be greater than it would be for the corn. “What they need to manage for is the total risk reduction in a system over a long period,” says Loy.

And he disagrees with Brown to an extent on whether young people will be returning to the ranch. “We’re seeing more of that now than we did 10-15 years ago,” he says. “There was a period of time in the late 80s where I think many agricultural producers actively discouraged their sons and daughters from coming home. But, at least my conversations with college students here, I see a lot more of them that are interested in going back into agriculture, ...”